The Central Enterprise Internal Audit Problems Research

In today’s world, competition between countries is mainly reflected in the economic field, while big enterprises are the main force of economic competition. Central-government-owned enterprises(referred to as central companies)is the "national team" of China’s enterprises and large enterprises within the state-owned companies, carrying the critical responsibility to participate in international competition. Since2003State-owned Assets Supervision and Administration Commission (hereinafter referred to as the SASAC) was established in March16, central companies have reduced from196to118through mergers and restructuring, while overall competitiveness has greatly enhanced. From2002to2011, the total assets of central companies increased from7.13trillion yuan to28trillion yuan; operating income increased from3.36trillion yuan to20trillion yuan, and38is now on the "Fortune500" list.Although they has been developing fast, but many of them still lack a sound governance structure, internal control mechanisms are inadequate, risk awareness is weak, financial management is weakly based, as well as accounting policies do not comply to norm. Existence of these problems seriously affects the market competitiveness of central companies, also took toll on social image of them. It’s urgent to strengthen internal audit, ensure sustained and healthy development of them and reach the goal to build "strong and excellent, world-class" companies of the12th Five-Year Plan.It’s consensus that internal audit plays a unique role in addressing these problems internationally. Especially after the international financial crisis, major multinational corporations adopt strengthened internal audit to deal with risks. Currently, China’s central companies have not completed the transition to a modern internal audit system, with internal audit concept lagging behind, organization of audit institutions and work being unreasonable, internal audit team understaffed, internal audit rules and regulations incomplete as well as participation the construction of the internal control and weak governance in "small treasuries". These problems seriously weaken internal audit’s role, leading to inefficiency of internal audit. In order to better exert function and role of internal audit and promote central companies to achieve their targets, this paper highlights a number of key issues in internal audit of central companies. My paper includes the following four parts.The first part is content, including the background, literature review and the definition of central companies as well as the central internal audit system evolution etc.The second part mainly discussed the necessity to strengthen the internal audit in both theory and practice. Theoretical aspect is based on fiduciary theory, believing the prevalence of central enterprises entrusted with economic responsibility is the basis of internal audit, at the same time, central companies continue to expand, industry particularity and the need to improve risk management ability, make internal audit prosper. Practice section focuses on the many problems central enterprises are facing, concludes that strengthening internal audit is imperative for central enterprises to improve the modern enterprise system, enhance the management level and meet the urgent need of external regulation.The third part is the main section. It researches on central companies’internal audit, including (1) establish a new concept of internal audit, completing internal audit transformation;(2) improve internal audit settings and organizing method;(3) strengthen internal audit team as well as work rules and regulations;(4) internal audit participating in the construction of internal control and "small cash pool" issues.